MGM Advantage Annuity Index Reveals Further Rate Falls
MGM ADVANTAGE ANNUITY INDEX REVEALS FURTHER RATE FALLS
- Conventional rates have fallen by 2.13% since March 2012 and enhanced rates have declined by 2.29%
- Overall rates have fallen by 14% since June 2009
- Difference in retirement income between the top enhanced annuity rates and bottom standard annuity rates – 43% for men and 46% for women
The latest findings from the MGMAdvantage Annuity Index1, which tracks the income paid on enhanced and conventional annuities on a quarterly basis, reveals average conventional and enhanced rates fell by 2.13% and 2.29% respectively in just three months. The 2.1% drop in overall average annuity rates between March and June 2012 also means that rates have fallen by 14% since June 2009, when the Index was started.
Aston Goodey, Distribution and Marketing Director atMGMAdvantage comments: “If you are considering buying an annuity this year, then for some customers it maybe more beneficial to buy sooner rather than later, if indeed rates continue to fall.”
The Annuity Index reveals the difference in retirement income between the top enhanced annuity rates and bottom standard annuity rates for those aged 65+ with a £50k pension pot, is 43%for men and 46% for women.
Aston Goodey continues: “With annuity rates unlikely to go up in the near future, there could be a cost to delaying the purchase of your annuity. The impact of Solvency II and the billions of pounds being pumped into the British economy to buy gilts has affected annuity rates. This, teamed with the forthcoming EU Gender ruling which, from December, will stop insurers paying men higher annuity rates, means that if you are going to buy an annuity – then you might wish to consider buying now before rates potentially come down further.”
Further findings from the Index reveal that the average difference in the income paid between the top and bottom quartile conventional annuity rates for men is 14.53% and 17.25% for women (23.32% and 28.08% in March 2012 respectively). In relation to enhanced annuity rates, the corresponding figures are 18.72% and 17% (22.10% and 20.59% in March 2012 respectively).
The difference between the average conventional and enhanced annuity rates is 18.7%. Over the average retirement, with a pension pot of £50,000, this would amount to £8,912.76 for men and £10,290 for women.
£50,000 Pension Pot | Average Conventional Annuity (per year) | Average Enhanced Annuity (per year) | Percentage Difference | Difference over the first 5 years of retirement | Difference over average retirement |
|---|---|---|---|---|---|
| Men | £2,853.34 | £3,377.62 | 18.37% | £2,621.40 | £8,912.76 |
| Women | £2,703.50 | £3,218 | 19.03% | £2,572.50 | £10,290 |
June 2012
Given the overall trend for falling conventional and enhanced annuity rates, MGM Advantage says that the use of the Open Market Option is even more critical in shopping around to secure the best possible annuity rate. Many retirees are unaware that they can increase their income by getting a better deal with other annuity providers and taking their pension savings elsewhere. If you smoke or have health issues you should qualify for an enhanced annuity, which pays out a higher level of income on the assumption that your life expectancy is reduced.
So when is the right time to buy? It really depends on individual circumstances, sources of income, size of the pension pot and attitude to risk and health. It is difficult to second guess the market, however the likelihood of annuity rates falling further means it might be wise to buy an annuity sooner rather than later.
Investment-backed annuities are also worth considering and theMGM Advantage Flexible Income Annuity can offer the potential for investment growth, an income that can provide a natural hedge against inflation and it also comes with a minimum income guarantee for peace of mind. Funds also have the opportunity to recover within the annuity wrapper.
Conventional Annuities
£50,000 pension pot | Top Quartile average rate (per year) | Bottom Quartile average rate (per year) | Percentage difference | Difference over the first 5 years of retirement | Difference over an average retirement |
|---|---|---|---|---|---|
| Men | £3,026.30 | £2,642.29 | 14.53% | £1,920.05 | £6,528.17 |
| Women | £2,883.16 | £2,458.96 | 17.25% | £2,121 | £8,480 |
June 2012
Enhanced Annuites
£50,000 pension pot | Top Quartile average rate (per year) | Bottom Quartile average rate (per year) | Percentage Difference | Difference over the first 5 years of retirement | Difference over an average retirement |
|---|---|---|---|---|---|
| Men | £3,618.81 | £3,048.18 | 18.72% | £2,853.15 | £9,700.71 |
| Women | £3,432.59 | £2,933.69 | 17% | £2,494.50 | £9,978 |
June 2012
Notes to editors:
1. Annuity rates are based on analysis of data from Investment Life and Pensions Moneyfacts byMGMAdvantage (June 2012). The analysis looked at level annuities without a guarantee and income levels are based on a pension pot of £50,000 and a retirement age of 65. To create total retirement income figures the Index multiplied annual annuity income by 17 years in the case of men and 20 years in the case of women. Enhanced rate figures are from a sample of smoker rates and enhanced rates based on health conditions.
The Index based its life expectancy figures on Office of National Statistics figures.
For further information
MGM Advantage: Paul Keeble 07833 085387 paul.keeble@mgmadvantage.com
Team Spirit: Hannah Green 07880 732732
About MGM Advantage
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MGM Advantage is a specialist in retirement income, selling its products through Independent Financial Advisers. Based in Sussex, the life assurer opened its doors in 1852 as Marine and General Mutual Life Assurance Society, making it Britain’s longest-registered company with 160 years of mutuality. In 2008, the company rebranded asMGMAdvantage – a specialist in retirement income solutions.
Its market-leading products include an investment-backed annuity, the Flexible Income Annuity, the first retirement income product to be rated five stars by Moneyfacts. This gives customers the flexibility to change income levels at different stages of retirement and the potential for growth and therefore, the potential to negate the impact of inflation. It also provides a minimum income guarantee and death benefits. Enhanced rates are also available for the Flexible Income Annuity.
MGM Advantage also specialises in providing enhanced annuities designed to provide additional income in retirement for people with any health conditions or a poor medical history.
Through new product innovation and development it is always looking to find ways in which its customers can improve their retirement income, and encourages people approaching retirement to shop around for the best annuity.
MGMAdvantage is a mutual society owned by its members, and manages assets in excess of £1.9 billion (as at April 2012).MGMAdvantage Designs for Retirement,MGMAdvantage and theMGMAssurance logos are Trade Marks of Marine and General Mutual Life Assurance Society.